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IMF and the Imelda Marcos Shoe Museum

How can the IMF best avoid becoming a scapegoat in every financial crisis?

July 20, 2001

How can the IMF best avoid becoming a scapegoat in every financial crisis?

Americans are highly litigious. They like to sue McDonald’s Corporation for serving them hot coffee — and tobacco companies for not saving them from themselves. They sue doctors for not treating them successfully. But even America’s trial lawyers have not yet devised a system for suing doctors when a patient merely falls ill — or breaks a limb.

The International Monetary Fund is in an unenviable position of being fingered as a scapegoat whenever there is an emerging market crisis. Demonstrators regularly disrupt its meetings, so that Fund directors are whisked in and out of conference halls like prosecution witnesses at a mafia trial.

Even respectable economists seem to allege that, if it weren’t for the IMF medicine, the world would be a harmonious, prosperous place — and financial crises would have long become a thing of the past.

The situation the IMF thus regularly finds itself in is like being called to treat a patient and to have other doctors, relatives and idle bystanders not only question your medical decisions, but also claim that if it weren’t for your treatment the patient wouldn’t have been sick at all.

Professor Steve H. Hanke of The Johns Hopkins University, writing in Forbes recently, claimed that Turkey and Indonesia have effectively become IMF protectorates. This implies that the IMF runs the two countries — which is what having a protectorate really means — and therefore all the troubles that those countries have experienced in recent months and years have to be laid directly at its doorstep. The IMF, we are led to believe, is guilty of “misbegotten micromanaging, which has failed to stabilize their economies.”

Strong stuff, that. The politically charged language harks back to the colonial past, when Indonesia, for one, was a European colony, divided as it was between the Dutch and the Portuguese for some 300 years. Turkey, while never a colony, was effectively a protectorate of, at various times, Great Britain, France and Germany.

Clearly, the reasoning goes, these countries’ colonial (or semi-colonial) past is the root of all problems in the emerging economies. Consequently, the presumed continuation of such policies, embodied in the virtual “protectorate” imposed on a number of countries around the world via the IMF, perpetuates the cycle of financial turmoil, economic crises and poverty, or so we are led to believe.

Now, with all that as a backdrop, it is very tempting to draw broadly based conclusions about the current demise of the global economic situation. Just take a look at current newspaper headlines. The drumbeat that little Argentina will cause the rest of the world to keel over is steady.

But what the world is facing today is not another global financial crisis, but a series of discrete multi-local debacles. While a jittery financial market environment contributes to nervousness in markets all around the world, each crisis has its own unique causes, circumstances — and limits.

True enough, colonialism did contribute to economic problems in Africa and Asia. However, it should be remembered that Indonesia, in particular, has been misruled by local administrations for the past half-century — and has lived through 30 years of a corrupt and incompetent (post-colonial) dictatorship by General Suharto.

It is also true that “countries” were arbitrarily carved out of ill-defined territories by colonial administrations, but this process didn’t have an impact on Asia as much as it did Africa. As a matter of fact, Jakarta created part of its own problem in this respect, by invading Portuguese East Timor — and holding its people within Indonesia against their will.

Curiously, Indonesia is ranked by Transparency International as one of the most corrupt countries on earth to do business in. In its list of 90 countries, it comes in, charmingly, at 85, sharing the spot with Angola.

Incidentally, Turkey and Argentina, which are currently being hit hardest by the crisis, while somewhat less corrupt, are also bunched together in the lower part of the league table. Turkey scores 3.8 points out of the possible 10, while Argentina, at 3.5, is on par with Ghana, Senegal and Bulgaria.

Both those countries also share decades, if not centuries, of fiscal and economic mismanagement. The roots of their problems go back to the time when the existence of the IMF was not even on the map.

On the other hand, when countries decide to shake off the old, shady legacies and do something about fixing their economies, they generally tend to succeed. Mexico, which a year ago ended eight decades of one-party rule and elected opposition candidate Vicente Fox, as president, has been insulated from the Latin American crisis.

The old pattern, whereby a Mexican crisis would promptly infect Brazil and Argentina and vice versa, has been broken. To be sure, Brazil and Argentina are still spreading the financial disease to each other, but Mexico has emerged as something of a regional safe haven in this environment.

It is also useful to remember that the IMF is a multilateral organization, meaning that it is owned by the governments of the countries it is meant to assist. This implies, first, that its mandate doesn’t allow it to come in and change policies implemented by the domestic government — even if further inaction would imminently lead to a worsening of the crisis. Nor can it replace national bureaucracies, change political leaders or implement reforms. All it can do is criticize from afar and issue warnings.

As a result, the IMF is more often than not only able to come in after the fact, when misguided policies had already led to a crisis and the Fund is charged with cleaning up the resultant mess. What the IMF in that situation can do is to send a message both to its critics and to member governments.

How could the IMF better signal non-expert audiences what its work is really about? Since art tends to be the most effective universal means of communications, I propose an art project for the IMF.

Actually, an installation — in keeping with the prevailing tastes in New York, London and other contemporary art Meccas. We even know where to place it: in the glass-domed courtyard inside the IMF headquarters at 700 19th Street in Washington, D.C.

The installation should consist of a pile of Imelda Marcos’s shoes, borrowed from the newly established Shoe Museum in the Philippines, which the country’s former first lady helped open earlier this year. On the wall just to the side of this edifying display, there should be a sign that could also be adapted as an IMF motto to explain its reformer’s mission:

“We are working to ensure that such feudalist displays of flagrant wealth everywhere are moved from presidential palaces to the dust bin of history museums.”